Northwestern is a state chartered savings and loan association with its principal place of business in Chicago, Illinois. Home Owners is a federally chartered savings and loan association with its principal place of business in Boston, Massachusetts. Home Owners is not registered to conduct business in Illinois, does not have an office in Illinois, and does not own any property in Illinois. Home Owners pools and sells participations in residential mortgages. In 1986, Home Owners entered into four participation and servicing agreements with Merrill Lynch Mortgage Capital, Inc. The agreements were negotiated in Massachusetts and New York and were executed and issued from Home Owners' Boston office. None of the mortgage pools contain a mortgage negotiated, executed, serviced, or relating to property located in Illinois. In 1987, Merrill Lynch assigned its rights in the participation agreements to Northwestern. Under the agreements, those rights were freely transferable without Home Owners' consent. Pursuant to the agreements, Home Owners issued new certificates to Northwestern reflecting the transfers. Knutson Mortgage Company, Inc., a wholly owned subsidiary of Home Owners, administers the agreements. Pursuant to account letter agreements, escrow account letter agreements, and certificate account letter agreements, Knutson acts as the "Company" under the participation and servicing agreements. Knutson sends monthly payments and reports and other correspondence to Northwestern in Illinois. Although a wholly owned subsidiary, Knutson is an entity distinct from Home Owners. Knutson files its own tax returns, has its own management, and has its own financing. The present dispute concerns whether plaintiff can initiate a program to promote prepayments by mortgagors in the participation programs.

This court has jurisdiction over defendant only if an Illinois court would have such jurisdiction. Jacobs/Kahan & Co. v. Marsh, 740 F.2d 587, 589 (7th Cir. 1984). In addition, the exercise of such jurisdiction must be consistent with constitutional due process. Id. Plaintiff claims that, under Illinois law, there is long-arm jurisdiction over defendant because plaintiff's claim arises from the transaction of business within Illinois. See Ill. Rev. Stat. ch. 110, para. 2-209(a)(1).

The contracts underlying the present case were negotiated and executed outside Illinois. All the property relevant to the contracts is outside Illinois and contract performance occurs outside Illinois. The acts of defendant, which are the acts to focus on, Gordon, 498 N.E.2d at 722, all occurred outside Illinois. Also, defendant did not solicit, or even negotiate, a contract with plaintiff who is in Illinois; defendant's contact with plaintiff was brought about by the assignment to plaintiff, an act defendant had no control over. Consistent with the above cited cases, the communications and payments to plaintiff do not constitute transacting business within Illinois. Therefore, this court lacks jurisdiction over defendant because there is no proper jurisdiction under Illinois's long-arm statute. It is unnecessary to consider the constitutional dimension of personal jurisdiction.

IT IS THEREFORE ORDERED that defendant's motion to dismiss for lack of personal jurisdiction is granted. The Clerk of the Court is directed to enter judgment in favor of defendant and against plaintiff dismissing plaintiff's cause of action without prejudice for lack of personal jurisdiction.

JUDGMENT IN A CIVIL CASE - January 27, 1989, Filed

Decision by Court. This action came to trial or hearing before the Court. The issues have been tried or heard and a decision has been rendered.

IT IS ORDERED AND ADJUDGED that pursuant to the Court's Memorandum Opinion and Order, defendant's motion to dismiss for lack of personal jurisdiction is granted. Judgment is entered in favor of defendant Home Owners Federal Savings & Loan Association and against the plaintiff Northwestern Savings & Loan Association dismissing this cause of action without prejudice for lack of personal jurisdiction.

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